Table of Contents
- What Is the Nasdaq?
- Deep Dive Into the Nasdaq: How It Operates
- Exploring the Nasdaq Composite Index
- The Evolution and Impact of Nasdaq's Trading System
- A Chronicle of Nasdaq’s Growth and Milestones
- Pioneering Diversity: Nasdaq’s Board Disclosure Rule
- Analyzing Nasdaq’s Financial Health and Revenue Streams
- FAQs
- The Bottom Line
What Is the Nasdaq?
Let me tell you directly: Nasdaq is a groundbreaking global electronic marketplace that changed how we buy and sell securities. It started as the National Association of Securities Dealers Automated Quotations, set up by what we now call FINRA in 1971, creating the first automated stock exchange. This system sped up trading and made it more transparent, paving the way for tech advancements in finance. Today, you'll find over 5,000 companies listed here, many of them big tech names like Apple and Microsoft. As it expanded, Nasdaq developed into three tiers—the Nasdaq Global Select Market, the Nasdaq Global Market, and the Nasdaq Capital Market—and it stands as a vital measure of the tech sector's strength and the overall market's condition.
Deep Dive Into the Nasdaq: How It Operates
Nasdaq operates as a stock exchange based in New York, starting as a NASD subsidiary and opening on February 8, 1971, as the first automated one. It separated from NASD in 2006 to become a national securities exchange, then merged with OMX in 2008 to form Nasdaq OMX Group, renaming to Nasdaq Inc. in 2015. You should know it handles trading for more than 5,000 companies daily, including tech leaders like Apple (AAPL) and Microsoft (MSFT). Since 2006, it's structured in three tiers: Nasdaq Global Select Market, Nasdaq Global Market, and Nasdaq Capital Market. The exchange manages 29 markets for stocks, derivatives, fixed income, and commodities in the U.S., Canada, Scandinavia, and the Baltics. It also runs a clearinghouse and five central securities depositories in the U.S. and Europe, with its tech used by 100 exchanges in 50 countries.
Exploring the Nasdaq Composite Index
When people say Nasdaq, they often mean the Nasdaq Composite Index, which tracks over 2,500 stocks listed on the exchange. This includes heavy hitters like Apple (AAPL), Microsoft (MSFT), Alphabet (GOOG, GOOGL), Meta Platforms (META), Amazon (AMZN), and Tesla (TSLA). The index hit a record high of 16,057.44 on November 19, 2021, then fell more than 23% by April 2022, with a 13.3% drop that month being its worst since October 2008. It closed at 13,787.92 on June 30, 2023. Remember, Nasdaq Inc. itself trades as NDAQ and has been in the S&P 500 since 2008.
The Evolution and Impact of Nasdaq's Trading System
Nasdaq's computerized system was created as a better alternative to the old specialist system that dominated for nearly a century. Technology has evolved quickly, making this electronic model the global standard. It was a natural fit for emerging tech companies to list here, and as the tech boom hit in the 1980s and 1990s, the Nasdaq Composite became the go-to benchmark. This made it the index tied to the dot-com boom and bust—rising nearly 150% in 16 months to March 2000, then crashing almost 80% by October 2002.
A Chronicle of Nasdaq’s Growth and Milestones
In November 2016, Adena Friedman became CEO after her promotion from COO, marking her as the first woman to lead a major U.S. exchange.
Pioneering Diversity: Nasdaq’s Board Disclosure Rule
On December 1, 2020, Nasdaq proposed a rule for listed companies to disclose board diversity, requiring at least one female director and one from an underrepresented minority or LGBTQ+ group, or explain why not. The SEC approved this on August 6, 2021.
Analyzing Nasdaq’s Financial Health and Revenue Streams
Nasdaq earns from clients like financial institutions, brokers, investors, and corporations. Its main revenues come from market services for access, investment intelligence like data and analytics, market technology for trading platforms and anti-crime safeguards, and corporate services including listings and investor relations. For 2022, it reported $1.12 billion net income on $6.23 billion total revenue, with revenue minus transaction expenses at $3.58 billion. It raised its quarterly dividend to $0.78 per share from $0.70 in 2021.
FAQs
Is the Nasdaq a U.S. Stock Market? Yes, it's a U.S. exchange in New York City, opening in February 1971 with over 5,000 domestic and international companies; it was the world's first automated exchange.
What Is the Nasdaq 100? It's a large-cap growth index of 100 top non-financial companies listed on Nasdaq by market cap, including Apple, Dollar Tree, Keurig, Sirius XM, and Zoom; you can invest via mutual funds, ETFs, options, futures, or annuities that track it.
Does Apple Trade on the New York Stock Exchange or the Nasdaq? Apple trades on Nasdaq as AAPL, going public on December 12, 1980, at $22, closing at $190.25 on June 30, 2023.
The Bottom Line
Nasdaq is a key U.S. stock exchange with over 5,000 companies, emphasizing technology, starting in 1971 as the first automated one. Its Composite Index, with over 2,500 companies, gauges U.S. and global economies.
Other articles for you
A special purpose vehicle (SPV) is a subsidiary created by a parent company to isolate financial risks and manage specific assets or ventures.
Midstream in oil and gas operations involves processing, storing, transporting, and marketing petroleum products, bridging upstream extraction and downstream refining.
A zombie foreclosure happens when homeowners abandon their property after a foreclosure notice, mistakenly thinking they must leave, while still holding title and responsibilities.
A Qualified Personal Residence Trust (QPRT) is an irrevocable trust that helps reduce gift taxes by removing a home from your estate while allowing you to live there for a set period.
Tax planning is about analyzing finances to minimize taxes through strategies like retirement contributions and gain-loss harvesting.
Institutional investors are large entities that manage and invest significant funds on behalf of others, influencing markets more than individual retail investors.
Risk assessment evaluates the potential for loss in assets, loans, or investments to guide decisions and mitigation strategies.
A natural hedge is a strategy to reduce risk by using inherently offsetting assets or operations without complex financial tools.
Affiliated companies are entities where one holds a minority stake in another or both are controlled by a third party, distinct from subsidiaries with majority ownership.
Permanent life insurance offers lifelong coverage with a built-in savings component that grows tax-deferred.